Thursday, 26 January 2017

VARDY UPSET PUB YIELDS TO NALCOR OVER DARKNL REVIEW

Guest Post Written by David Vardy

PUB
INVESTIGATION INTO SUPPLY ISSUES AND POWER OUTAGES

Dark NL
sparked an investigation by the PUB into the reliability of our power system,
an investigation which is going into its fourth year. It has received little
media coverage, despite its great importance.

On January
20, 2017 the Public Utilities Board (PUB) issued an Order, P.U. 2(2017),
striking down expert evidence filed by the Grand River Keeper Labrador (GRK), a
registered intervenor. The Order is part of the PUB’s investigation into supply
issues and power outages which they announced on January 17, 2014. The
investigation covers matters relating to the reliability and availability of
power both before and after interconnection with Muskrat Falls and was prompted
by a number of power outages which took place in 2013 and early 2014. The
Board’s Order has the effect of removing expert evidence relating to two major
risks to the power system from further consideration during the investigation
into the supply of power. The purpose of this post is to recommend solutions to
this problem.

GRK Focus on
North Spur and Water Management

The GRK
focused its attention upon the availability and reliability of power from
Muskrat Falls both with respect to the North Spur and to the effectiveness of
the water management agreement on the Churchill River. In response to a motion
by NL Hydro, the PUB struck two

reports
prepared by Dr. Stig Bernander, an internationally recognized geo-technical
expert, concerning the stability of the North Spur. It also granted Hydro’s
motion to strike a report prepared by Philip Raphals of the Helios Centre
concerning the impact of the recent decision of the Quebec Superior Court upon
the ability of CFL(Co) to manage the water flows in the Churchill River, which
concluded that, should the court decision be upheld, the capacity available to Hydro to serve Island demand would be
far lower than the amounts claimed by the utility.

David Vardy

The evidence
filed by GRK was opposed by NL Hydro on the grounds that the matters raised
were beyond the scope of the hearing. They argued that the Bernander reports
were related to engineering and construction and that the PUB had excluded such
matters from the investigation. And they, perplexingly, claimed that, while the
Court’s decision “may have an impact on the manner in which water will flow
from the Churchill plant and the timing of energy produced at Muskrat Falls”,
it nevertheless has no implications regarding the availability or reliability
of power.

The GRK has
argued that the remediation of the stability problems at the North Spur may be
inadequate and that further evaluation by geo-technical experts is necessary.
Unless adequate measures are undertaken in advance, any failure of the Muskrat
Falls dam would likely have catastrophic consequences for Island electricity
supply.

On the
question of the actual capacity at Muskrat Falls to which NLH will have access,
GRK’s evidence pointed out that Muskrat Falls relies on a Water Management
Agreement to which Hydro Quebec is not a signatory, which in turn relies on
Nalcor’s interpretation of the renewal terms of the Churchill Falls Power
Contract. The Quebec Superior Court decision clarifies the powers of Hydro Quebec
under the Renewal Contract, precluding the banking and withdrawal of power upon
which Nalcor is relying for Muskrat Falls to generate its full 824 MW
potential. GRK argues that, in order to properly assess the reliability of
Island power supply after interconnection, the PUB needs to be aware of the
amount of power that will be actually available to Hydro to meet its system
peak, which is far less than the 824 MW cited in Hydro’s documents.

The PUB
rejected these arguments, stating that the information in both reports “would
not add to the Board’s understanding of the issues or assist the Board in its
review and may serve to unduly complicate the review.”

Inconsistent
approach to generation and transmission

The power
outages three years ago prompted the PUB to investigate availability and
reliability. The PUB decided to break its investigation down into two phases:
the first relating to the Isolated Island system before interconnection with
Muskrat Falls and the second relating to post interconnection issues. Their
consultant, the Liberty Group, has now completed two reports, one for each of
these two phases.

The second
Liberty Group report deals at length with transmission issues after
interconnection, including the transmission line and submarine cables across
the Strait of Belle Isle, as well as with on-Island generation, but not with
issues at the Muskrat Falls generation site. Reports prepared for Newfoundland
Power and the Consumer Advocate also deal with design issues associated with
the transmission line but steer clear of the Muskrat Falls site.

Both water
management and the North Spur are issues relating to the generation component
of our electric power system. The PUB has been inconsistent, both in its
conduct of the investigation and in its ruling on GRK’s evidence. The PUB has
allowed the production by Newfoundland Power and the Consumer Advocate of
expert evidence concerning the reliability of the transmission components of
the Muskrat Falls Project, and indeed has mandated its own experts (Liberty) to
look into these questions. However, it has confined its investigation of
generation issues to sources on the Island, excluding Muskrat Falls. The effect
is that, in its investigation into reliability of the post-Muskrat system, the
PUB is acting as if it had jurisdiction over the transmission components of the
Muskrat Falls Project, but not the generation component. The 2013 Muskrat Falls
Project Exemption Order, which removes the Muskrat Falls project from PUB
jurisdiction, makes no such distinction.

Recommendations

The other
intervenors include Newfoundland Power, Industrial Customers, Vale, Danny
Dumaresque and the Consumer Advocate. None of these intervenors took a position
with regard to NL Hydro’s motion to strike the GRK reports. The Consumer
Advocate did however make a submission arguing that it would be premature to do
so. The GRK must now decide, and quickly, if it will appeal the decision of the
PUB to the Appeal Division of the Supreme Court. However, the cost of pursuing
an appeal may well be beyond its reach.

My first
recommendation is to the Consumer Advocate. Given the importance of
post-connection reliability to Island consumers, the Consumer Advocate should
offer to join in such an appeal, in order to ensure that all matters relating
to availability and reliability of power are addressed by the Board. By so
doing the Consumer Advocate will be discharging his mandate to protect the
consumer by ensuring “lowest cost consistent with reliable service.”

My second
recommendation concerns the Muskrat Falls Project Exemption order, issued by
the provincial government in 2013, which removed the Muskrat Falls project,
including both transmission and generation, from the jurisdiction of the PUB.
This Order reaffirmed an earlier Order which had been issued at a time when
Lower Churchill development was intended principally for export rather than use
by local consumers.

The
government should remove the fetters upon the PUB imposed by the Exemption
Order (O.C. 2013-342) so that the Board will be able to examine all matters
relating to reliability and availability of power, as well as matters relating
to its cost, which have up to now been outside of its jurisdiction. This can be
done by rescinding the Order.

Rescinding
the Exemption Order would significantly improve the oversight and independent
assessment of the Muskrat Falls project and would be a vital component of
government’s commitment to improved transparency and accountability. It would
restore the full powers of the PUB and allow it to embark upon an
all-encompassing inquiry into the reliability and availability of power.
Immediate action by government would empower the PUB to discharge its duty in
the investigation into supply issues and reliability of power and to ensure
that the electrical power system is sufficiently robust to maintain an adequate
power supply at all times.

17 comments:

A couple of things David. The usual metric for utilities boards is evidence of public interest is admissible. This is a low bar. The fact that the PUB would exclude both the Bernander and Raphals submission, that both far exceed the "public interest" test is evidence the PUB is not interested in its mandate to protect the public from incompetence and waste. Rather it is politically neutered and part of the government smokescreen to keep residents uninformed and in the dark.

In other words the PUB is now demonstrably corrupt and part of the problem. This is the last thing the helpless rate/taxpayers deserve.

Your suggestion that the "consumer advocate" appeal on behalf of GRK is a good one. Another good idea would be for the St. Johns lawyers that have been bleating from the sidelines for years to rush to defend this egregious violation of the public interest. It is also a test of the advocate's mettle.

An excellent summary of the situation and how if might go forward.... with the understanding that as the process drags out in court, we continue to waste precious hundreds of millions of dollars instead of putting Muskrat on ice, pending review. Feehan said yesterday (on CBC) that at least the cost of stopping Muskrat should be disclosed to the public. Whether the PUB is corrupt, as Bruno says, I do have a job understanding why the PUB ignored the Consumer Advocate in April. Johnson stated the power companies had failed in their Conservation plans, and should provide incentives for important measures that reduce energy use and peak demand. Best I can gather is that the PUB defers to government policy not to consider any meaningful Demand Management measures. So let demand unnecessarily climb up, and employ rotating outages as a solution! Even Feehan yesterday cited Conservation as the key component that should have been included as the alternative to Muskrat. But he now argues that customer conservation going forward will be detrimental to energy use and the viability of Muskrat and require payment for Muskrat through higher taxes. (others have said some years ago). Down the rabbit hole when conservation is suggested as a bad policy, and will fail, I suggest, as customers are moving exponentially in this direction recently, and shock power rates are 3 or 4 years away yet. Winston Adams

I am glad you made your point without the technobabble that usually weakens your argument Winston.

DSM and conservation in particular is the only tool the ratepayer has given the failure of institutions to rationally plan supply or protect the consumer. The problem Winston is that those most in need do not have the resources to cut consumption and will pay a disproportionate portion of the massive increases.

A PUB that does not honour its sacred trust to the rate/taxpayer is by definition corrupt. The PUB are now exposed as political hacks after barring the Bernander and Raphals testimony that is crucial to the public interest from the reliability assessment.

Technobabble is what separates the wheat from the chaff. When you have 100 measures for demand reduction with Conservation and efficiency, some are very meaningful, some of little value. Reduction in technobabble is good, least readers tune out.Johnson, the consumer Advocate refused to call efficiency experts(who need t use technobabble) to support his statement. He refused to call me, thought I offered free of cost. The PUB and power company dismissed Johnson's statement because in part he did not call expert witnesses to support his position............seems like a farce. Nfld Power official, Gary Smith, told me that Johnson would not have the last word.........and he was right. Why has NO ONE ever called for a Efficiency Corporation for Nfld, as part of our energy policy, as is very beneficial in most all jurisdictions, for 15 years or more, and 10 years in Nova Scotia?Winston

David are you not a lawyer? Do you not personally know the St. Johns lawyers that have expressed concerns about the "Muskrat Madness"? Can you not rally enough pro bono goodwill to challenge the PUB exemption of the evidence by Bernander and Rakphals that Grand Riverkeepers entered into evidence?

If your answer to any of these questions is yes get off your duff and file that appeal with GRK NOW!

Bruno, I was surprised to learn David's age ( as the fine picture of him suggests he is a much younger man) and then more so to see the effort he has put into Muskrat Madness. To suggest he he is constantly siting on his duff doing nothing ........... what can I say, you are a clown? Trump gets called that for his outrageous statement (we should take Iraq oil, we need to bring back torture, it absolutely works). If not for your affection for John Lennon, you have little likeable qualities, as indicated by your comments to everyone. So, why not avoid being a clown all the time, as your views which have some value gets diluted. Lennon would not approve of your tactics.Winston

It is time to stop making excuses and act to protect your future as a viable province. It is also time to stop the madness of building a dam on a quick clay formation with no bottom.

I may be blunt but better that than politeness to a fault. My track record speaks for itself. I spoke and acted early and suffered the slings and arrows. I have earned the right to speak bluntly about Muskrat the boondoggle.

Winston can you think of a reason that pro bono action by all the fat lawyers in St. Johns to challenge the corrupt PUB at this juncture in the disaster is unreasonable?

Are they all afraid of the clan chief? Does feudal compliance with the overlords define your faux democracy?

Bruno, my son, as they say in Nfld, don't let your piss get hot. Yes, I think it unreasonable to think all those fat cat lawyers, or a single on of them, will help challenge, pro bono, the pending disaster of Muskrat. I think this because it is not in their nature. Take the Dunphy Inquiry, are these lawyers acting pro bono to bring some justice to the tragic death of Dunphy. Take the 50 million successful class action suit on the residential school issue, and 15 million on the cancer issue with Eastern Health, etc........how much has lawyers made on unsuccessful cases against HQ on the upper Churchill, all expenses passed along to the rate or tax payer. Lawyers will continue to make millions off the boondoggle of Muskrat. And not a lawyer will step up to the plate pro bono.If the North Spur fails and lives lost, will they act pro bono at the inquiry? If one does I could eat my hat, but that is seal skin, so instead I pledge to donate 1000 dollars to the charity of that lawyer's choice. I little believe in absolute, meaning I may be wrong. Wasn't there a group pf lawyers called 2041 Group....not sure how many were fat cats.......but were did they go with that? On the lighter side.......Got to agree Lennon was terrific. But lawyers hardly (there may be rare exceptions) rise to the level of working class heroes, as they do little work. I mean a tradesman plasters, sanded and painted and put on window and door trim on a large room and charged me 1200 dollars, busy for a week. A lawyer will charge 300 dollars for an hour , so 1200 dollars for half a day and guarantee you nothing, you might get a verbal opinion, but not in writing. Call that work? If you do little work, you are less than a working class hero.............Lennon would need some more lines to cover lawyers....... Would you believe that Lennon was shot on my birthday, and his second name was Winston, and we are both called after that war monger... .Churchill? And he dropped Winston, as I consider doing......but my wife and friends tell that don't work...... stuck for life with Winston. How does Graham sound to you? CheersGraham or Winston

Ed Hollett's blog today is titled "Feehan, electricity prices, and the bigger problem" Some may have seen Feehan on CBC interview with Debbie Cooper. Hollett ends his piece saying...."one thing is for certain: the difficulties caused by half -baked, half -assed energy policy over the past decade go well beyond the pricing issue that Professor Feehan addresses" Hollett says that Feehan "misses entirely the core problem, which is the electricity policy inherent in Muskkrat fall in the first place". Absent from the debate by our local economists, power companies, government and this blog, is the economic concept of energy efficiency. The USA northeast states use what is now widely accepted by economists as the least cost energy resource:energy efficiency (characterizing energy efficiency as a resource , not a cost), and so deliver this resource to ratepayers, rather than a cost to be incurred. This mentality is used such that many jurisdiction use energy efficiency as the "First Fuel". Massachusetts has been in the forefront for this over the last 6 years. For every dollar invested in electric efficiency, the average benefit was $3.21 cents for homeowners and $4.27 for businesses. It also employed 65,000 workers and 4000 firms. No other energy resource or public policy comes close to providing these cost savings and greenhouse gas emission reductions. It reduced winter peak loads, which saved ratepayers there over 1.5 billion. The New England electric growth has been flat over the last 3 years largely due to energy efficiency, even as the country continues to recover from the 2008 recession. The ISO- New England , the region's power grid operator, projects no growth in electricity consumption over the next 10 years. This is not by chance. It is the result of the past 20 years of being committed to the energy efficiency policy. The law there, since 2008, required that electric and gas resource needs first be met through all available energy efficiency and demand reduction resources that are cost effective or less effective than supply. Since passage o the law, annual energy efficiency investments and savings have double. Further investments and savings are proposed. And it doesn't stop there. We, in Nfld, are two decades late in any consideration of this approach for Nfld, yet it has huge benefits, and should have been the bedrock policy instead of Muskrat. We need to stop Muskrat and quickly adapt such measures. Yet economists here have not embraced this concept or even written about it. Why not?Winston Adams

Yes Winston the concept of "negawatts" or saving energy has not entered the debate in NL. That economists can't realize that they are the cheapest for both the consumer and the utility...normally, is no mistake.

There is nothing normal about Nalcor's aims and the political forces that have stuck rate/taxpayers with the MF disaster. By design they have forbidden competition and encouraged electric heat, the most wasteful heat source.

They rationalized the fiscal madness claiming oil would be $160 bbl by 2018 escalating to $260bbl! by 2065! Oil is less than half the Nalcor dreams and we will all be driving wind powered electric cars long before oil costs $260 bbl. This madness in the underlying assumptions has yet to be challenged by Feehan or anyone else. They are part of the problem. They fear the clan chiefs and are devoid of gonads or backbone.

Never heard the term negawatt before, but see it was used since 1989. In essence ; reduction of energy use and peak demand, so nega (negative watts) which in essence is a saving , instead of megawatt(more power) Cute term. Actually, Roger grimes on VOCM today shows he sees the light on this concept. His piss was hot! And Gerry Skinner has a fairly good view on it. Disgusting, that this has been ignored? More like criminal. However Vardy has long supported the concept, to some extent, and Feehan , more so lately in a milder version, but too little and too late to avoid the waste of sunk cost so far. Locke.......he's in La La Land on this concept. WinstonWinston

I asked the head of a net-zero coalition a few years ago why they didn't go all the way towards being off-grid instead. His reply is that they were concerned about "stranded assets". Then I looked at the organization's sponsors and it was obvious that they were involved with damage control, not bettering the life of the general public.

We could go wild with negawatts and easily strand the entire Muskrat Falls "asset" (or should that be liability). Other than electronics, there are non-electric alternatives for almost everything that requires energy in a home. Propane fridge/stove, solar heat, wood heat. Without being too extreme, you could limit electricity to small appliances, an induction cooktop, refrigerator, electronics for TV and internet and LED lighting and the nega-watts would reduce household electric demand by 90%.

The sensible thing is not to reduce demand by 90 percent for all uses. We have some 1150 MW of hydro on the island, and 500 MW of oil fired at Holyrood, which runs at average 300 MW in winter. We need only reduce less than 50 percent, in winter time, to burn no oil at Holyrood, so why reduce 90 percent. Winter electric heat is easily reduced 50 percent. Our summer load is only about 600Mw, we have 50 percent surplus hydro then. We should optimize our island hydro with just some wind power an necessary......as for Muskrat......let it be stranded, as it will not be needed for the island needs. People are finally frightened of double the power rates and are doing what should have been an energy policy: reduced energy use through efficiency and conservation ( and does not require wearing sweaters in the house) The wisdom of other jurisdictions has been ignored, but residents are moving in this direction, which means doom for predicted power demand on the island. We could accept that outcome and save another 6 billion instead of wasting another 6. We have to absorb the 6 gone,sunk costs as they say, Danny's folly, we cannot absorb another 6.WA

About Des Sullivan

Uncle Gnarley is written by Des Sullivan, of St. John's.
He is a businessman engaged in real estate, retail and development companies.
A Director of Sullivan Capital Corporation, he is a former Executive Assistant to Premier's Frank D. Moores (1975-1979)and Brian Peckford (1979-1985).
He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB).
Uncle Gnarley permitted the use of his highly regarded name provided he could have full access to state his own rather unequivocable opinions. (A more detailed Profile of Uncle Gnarley is described in the very first Post entitled "Uncle Gnarley is alive and well" found on this site.
Sullivan is a firm advocate of sound fiscal management by the provincial government and intends to use this Site as a forum for commentary on the major issues of the day. Says Sullivan, "Newfoundland and Labrador inspires debate on a variety of issues, a veritable Muskrat Falls of opinion".
Readers are invited to leave their opinions, too.
Uncle Gnarley will post every Monday, and more often as events warrant.